iPhone 5s

Apple is a consumer electronics company which operates in hundreds of countries around the world. The company was founded by Steve Jobs and Steve Wozniak in 1976 where they produced a computer in a garage. The company has grown greatly since then but only gained worldwide popularity after the release of the iPhone. The share price of the company has been fairly stagnant up until that point, until it rose to make the company the most valuable company by market valuation.

Strengths

Innovation is the key to the company’s success. It has created unique products which have been ahead of the curve such as the iPhone which brought touchscreen technology to the mainstream. Other touchscreen phones were available at the time, but the products did not look appealing and did not have a good operating system. Other products like the iPad were created by Apple which also brought the market forward, in terms of design and in competition. This corporate culture towards research and development into new product ideas and thinking outside the box has created great goodwill within the company.

New way to access your phone and potentially pay for things.

One of things that Apple has been able to do with the successes of their product ranges is to collect a lot of money in cash. The company has over $100bn in liquid cash available on the balance sheet. The money has been criticised by its corporate investors for not investing it in companies or to return the money via dividends. Apple has started to take this information on board only after the death of Steve Jobs and has purchased companies, issued dividends and underwent share buy backs. This had inflated the share price more and also allowed Apple to use acquired companies technologies in their product range such as the Touch ID on the latest iPhone 5S.

Branding and brand loyalty is one of the best things that the company has going for it. Existing customers have been able to switch from on product to another product very easily due to the operating system. This has created a type of loyalty with consumers which is an excellent for Apple to keep and grow over time while it’s competition, particularly Android based smartphones, have found it hard to take some of this market back. The brand and the logo itself of the company is known globally by most people in the world and would be able to name at least one product made by Apple.

Weaknesses

The way in which the company prices it’s products can be seen as exploitative. The costs of manufacturing for the products are several hundred dollars less than the recommended retail price. This is the method in which the company has amassed its large cash reserve. The fact that the company has also been criticised for having questionable work practices in its manufacturing factories in China is also a problem which needs to be constantly monitored. These problems combined make it harder for the company to truly have a positive influence on the social aspects of the business.

How much premium per phone is too much?

The yearly product offerings of the iPad, iPhone and some MacBook products is a cause for concern for consumers and Apple also. When new products are expected to be released, Apple experiences a major decline in sales for that particular product which is expected. In most instances, consumers will be polarised in their opinions of new releases. Some customers can justify making a yearly purchase of a gadget which is useable just to get faster processors, while other consumers may not agree and find a product better for them elsewhere. Recently, the iPhone segment of the company has innovated in some aspects such as speed but lacks features which is found on various other mobile products made by competitors. Features such as near field communication (NFC) and better resolution cameras have been present in products other than Apple smartphones. Apple need to ensure that they can innovate enough on a yearly basis to justify a new contract renewal or upgrade from older handsets.

Opportunities

One of the main things Apple has been criticised about with the iPhone 5C is that the price point is too high. The greatest opportunity for Apple as a worldwide company to do is to create a lower priced budget smartphone to cater for the biggest developing markets in the world, China and India. Analysts expected Apple to price the iPhone 5C as a budget phone for the developing market, but was priced too high for that to be real. Under the new leadership of Tim Cook, Apple can create a budget smartphone for the developing markets to create brand loyalty from a younger age or to follow the wishes of Steve Jobs which is to be a premium priced consumer electronics company.

Growth is clear in the emerging markets. Why not cater to them?

There are various things the company can look into when choosing its future options. Reinventing existing products is the most common way in which all companies retain and possibly generate streams of revenue. Apple purchasing PrimeSense, which co-created the Kinect sensor for the Xbox 360, can yield future benefits. The way in which Apple could use this acquisition is to use the sensing technology in products like the rumoured Apple Television set or the Apple TV set top box. This would make the products have a unique selling point separate to conventional television sets or set top boxes.

Threats

Threats are usually considered to focus on the external factors, in the case of Apple, it’s the competition. The largest smartphone manufacturer Samsung is making it harder and harder for Apple to keep its customers. This is mainly done by the different features samsung offer on their smartphones. Even Nokia can boast the fact that they are creating smartphones for the developing market with their Asha range of phones which are available out of contract for a cheap price relative to the cheapest Apple product. Sony can use their imaging division to create smartphones with great cameras to entice photographer enthusiasts that want something compact which still produce compact camera quality images.

New features from old players.

The rapid movement in technology is a threat to Apple as well as a strength. If the industry moves faster than the company, Apple will lag behind. This is not the case but there can be potential for a rapid change in the way which products are used and interacted with in the long term. This would need to be considered when looking at the disposable incomes of its target market and how that will change as the global economy improves.

iPhone 5C and iPhone 5S Announcements

The new iteration iPhone has been announced by Apple on the 10th of September, where the company introduced 2 different iPhone models. There was a strong negative impact on the company’s stock price where the price dropped by 5% the day after the announcement. The primary reason this could be because analysts and consumers were hoping for a much lower price point for the lower end phone, iPhone 5C.

iPhone 5C

This iPhone has a plastic backing with the same internal technologies as the iPhone 5 so there is not much of a difference in technical power. The phone comes in 5 different colours and with the new operating system for all iPhones, iOS7. The iPhone 5C is due to be released on the 20th of September 2013 which is a lag of 10 days between the announcement and sale dates. Apple has also created new colour cases which are made solely for this phone and have chosen the base colours amongst others to provide contrast such as black and white. There is a slight improvement to the camera with the same features as the iPhone 5S, but some features have been revoked which would be to give consumers more reason to buy the premium handset.

Although this phone is seen to be a nice addition to the roster of phones available via Apple, various market analysts felt that the price point needs to be much lower to ensure that the company can benefit from selling these devices in the market, particularly the developing market. Apple has had a hard time trying to expand into developing markets such as China and India where smartphones are usually not subsidised by the carrier with a long term contract. These 2 markets consists of over 2 billion people which Apple could have gained some market share in if it had priced the lower end phone at a much lower price. Apple’s competitors such as Samsung and Nokia are using their low price, decent technology handsets in these markets and gaining a large market share which Apple could never attain if the prices remain so high. Even in developed markets, the iPhone 5C is still priced high for a phone which has last year’s technology inside it.

iPhone 5S

This version of the handset has much more exciting technology inside it. The handset costs slightly more when bought out of contract or pay as you go, but that could be because of inflation. The iPhone 5S has 2 main features which makes it completely different from the previous iPhones, firstly the Touch ID home button and the 64-bit architecture for its A7 processor.

The Touch ID allows the owner to use their fingerprint to unlock their phones without having to type in their passcodes. A potential indication has been hinted that the user can authorise payments for music and movies with their fingerprints and would eventually be open to third party applications. There is little worry for identity theft as the company has put the fingerprint data onto the A7 chip which is only accessible to the handset only and can’t be copied out of the chip. Although this was pushed as a key security feature, there could be a way for hackers to find a way to get this information.

The other main area of change is the 64-bit architecture of the CPU in the phone which is said to be the first in the world for a smartphone. This A7 chip will allow applications to run at a faster rate than the 32-bit processors which can be a reason for consumers to buy new the handset if they want the faster phones all the time. The other aspect which shows that Apple is thinking forward is that they can port this A7 chip to its tablets which in turn would run better programs and have better computing power for running graphic intensive applications such as games. Another forward thing Apple can push for is reducing its independence on Intel processors which could be more expensive when compared to UK processor company ARM Holdings in respect to its laptops and other Mac products. This would be an excellent opportunity for Apple to acquire ARM Holdings fully since they do have a lot of money on their balance sheet, as well as restricting the competition from having the intellectual properties of their processor manufacturing methods.

Which to buy?

The purchase decision will differ depending on the person’s perceived value of the new phones. The features of the new phones can be apparent to those who have not made an iPhone purchase before and are getting tired of their own smartphone. However, existing users may see this as pointless such as me. I can’t justify tying myself to a new 24 month contract to get a phone with a fingerprint scanner and a slightly better camera. I have a compact camera (Sony NEX F3D) for taking pictures and I hardly ever take pictures on my current iPhone 4S, only for those “on the whim” moments. Most of the features which are being promoted on the new phones will be available to me for free, via iOS7. The operating system update alone will keep me satisfied for another 2 years since I tend to buy the “S” versions of the phones as Apple would have kinked out any problems in the normal “numbered” phone.